Stimulus increased to aid foreign firms

The government's stimulus package for the pandemic-hit industries and service sector has been increased to Tk40,000 crore from Tk33,000 crore to aid foreign entrepreneurs working in the economic and export processing zones, and hi-tech parks.

Foreign firms under A, B and C categories in the economic and export processing zones, and high-tech parks will get the additional Tk7,000 crore as working capital loans, said the central bank's Banking Regulation and Policy Department in a circular on Thursday.

The Bangladesh Bank circular said, "Apart from local industries, foreign-owned and local-foreign joint ventures have also been affected by the virus pandemic. As the firms played a crucial role in job creation in the country, they have also been brought under the stimulus package."

To provide loans from the package, the Bangladesh Bank has asked the banks to inform the status of loans availed by the firms in high-tech parks as working capital until 30 June. The banks have been asked to notify the central bank about it within 5 November.

Besides, they have also been asked to mention the demand for loans.

When contacted, Abul Kasem Khan, former president of the Dhaka Chamber of Commerce and Industries (DCCI), told The Business Standard that the initiative to help foreign industries would bring two benefits.

"Firstly, existing foreign investors will be encouraged to invest more in the future. And secondly, new foreign investors will be interested in investing in Bangladesh as the measures would shape a belief that government assistance is available here during any crisis," he said.

Appreciating the government's initiatives to cushion the economy from the blows of the coronavirus crisis, he said the government's prompt measures to recover the economy from pandemic losses are helping businesses a lot. Besides, the aid for foreign firms signals that the government treats everyone equally.

Kasem said the amount of the stimulus package should be further increased if required.

However, Dr Zahid Hussain, former lead economist of Dhaka office of the World Bank, advocated for adding some conditions while aiding foreign entrepreneurs.

He said the stimulus should be given only for staff salary payments so that the firms with damaged exports do not go for layoffs.

Dr Zahid said, "The conditions could be such as only those firms who will not lay off employees will get loans under the package. If workers are not laid off, their income will not shrink, and the overall demand in the economy can be maintained. This will save the country's economy from recession.

"Since the government would subsidise half of the interest of the loans, the money should be given to foreigners with certain conditions. In this case, the best condition would be a pay-roll protection programme to keep the employment unhurt."

The interest rate on loans taken from the stimulus package is 9%. The government will subsidise 4.5% interest while the borrowers will have to bear the rest.

The Policy Research Institute's Executive Director Dr Ahsan H Mansur said large industries no longer need loan support. But the assistance will send a positive signal to foreign investors, which he thinks will come in handy in future.

He said the new entrepreneurs should be provided with support from the package alongside with the old entrepreneurs.

On 5 April, Prime Minister Sheikh Hasina announced a Tk72,750 crore stimulus package to salvage the economy from pandemic fallout. The stimulus later crossed Tk1 lakh crore. Under the package, Tk30,000 crore was allocated as working capital loans for the virus-hit industries and services.

In July, the package was increased by Tk3,000 crore to Tk33,000 crore to pay salaries to workers and employees of export-oriented industries. And now, the amount has been raised by Tk7,000 crore to Tk40,000 crore to aid the foreign and joint ventures.

Meanwhile, another central bank circular said foreign firms in the economic and export processing zones will get temporary accounts for investment.